November 09, 2023

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Good day. Happiness is fleeting, contentment is more sustainable, and these days, we just want less stress — but even that is hard to find at times.

Can you guess what portion of Americans currently feel "anxious" about their financial situation? a. 56% b. 68% c. 77%.

Here are the topics for today:

Americans Are Becoming 'House Rich' — What to Do With the Equity
A Path to a Happier Financial Life
How to Do Smart Debt in a High-Rate World

HOUSING

Americans Are Becoming 'House Rich' — What to Do With the Equity

There's been a lot of negative talk around the housing market and its astronomic prices over the last 1-2 years, but as they say, there are two sides to every coin.

Although rising prices are bad for those looking to buy, they've been a massive blessing to those who have already bought, and the numbers are astounding.

Home equity peaked in 2022, but it's still pretty close to those highs right now. Americans are now sitting atop roughly $30T in total home equity value, a number that equates to about $200,000 in tappable equity for every homeowner in the country.

Should you do something with your equity?

Maybe not: If you don't need the money for anything desperately and aren't going to use it to make improvements to your home, it might be best to just chill. Although no one can foresee where the housing market will go, doing nothing with your equity protects you against a downturn while continuing to shorten the length of your mortgage timeline.

But, tapping equity can be beneficial for the right reasons — here are a few ideas:

Get rid of PMI: If you bought your home with less than 20% down, you're on the hook for private mortgage insurance every month. But, once your equity crosses the 20% threshold, you can request to have this canceled. In most cases, this will be a little process between you and your lender that often involves an updated appraisal.
Improve: Using a home equity loan to improve the home itself is one of the most prudent ways to use your equity. It comes with numerous benefits, ranging from tax advantages, lower interest, and simply increasing the value of your home. In fact, remodeling projects have been found to return anywhere from 48%-94% depending on the project and where you live.
Buy another: Don't want to use your savings to buy a vacation home or investment property? Home equity is here to help, maybe. It's a tantalizing idea to be able to produce a down payment from the walls of the home you already have, and heck, it can be worth it if you consider the downsides too. Remember that home equity loans use your home as collateral, so you risk losing your residence in the worst case.
Invest: Whether taking out your home equity to invest is a prudent decision or not depends a lot on your financial situation. However, it's understandably tempting, in theory, to pull out that money and make a return on it in the markets, and in some specialized cases, that might make sense. If you're financially stable and able to easily repay the loan, sure, maybe this is an option for you.

MONEY MINDSET

A Path to a Happier Financial Life

It's almost inescapable. The idea of financial prosperity leading us to the promised land or a life without financial problems. It's promoted by our banks, workplaces, families, relationships, and undoubtedly the social media content we're bombarded with daily.

While this is a valiant and noble pursuit that often comes from a place of honest intentions, we can oftentimes find ourselves creating an idealistic image of the life we should have, without properly taking the time to prioritize how we can best organize our finances for the one we were given.

But, we can choose to combine a little more contentment with our goals.

Money buys happiness, to a point. We've all heard the statistic by now. Income increases happiness, up to about $75,000 annually, give or take. While this is obviously an overgeneralization that doesn't account for situational/location factors, the premise remains valid. Once we've got enough income to support our needs, wants, and investing for the future, money has less of an impact on happiness after that point. This doesn't mean we shouldn't try to achieve more, but it does mean it's okay to shoot for the moon and end up in the stars, so to speak.
Create time through organization and efficiency. Studies across industries and focus groups find that the more free time, and subsequently less rushing and stress, people have, the happier they're likely to be. You can focus on creating more free time for yourself in two main ways—organization, and efficiency.
Build confidence through learning. Whether or not you feel content with your financial situation might have less to do with the dollars, and more to do with how confident you feel in your ability to handle any financial situation that might come your way. One of the best ways to feel good about your abilities? Learning. If your company offers education reimbursement benefits, take advantage of it as it can offer you a nice personal and career ROI boost. Employer-sponsored learning resources not only afford you more skills but also save you potentially thousands of dollars.
Keep it personal: There are a lot of guidelines and rules of thumb out there, and almost every one of them is treated as gospel by those who abide by them. Nevertheless, you shouldn't let peers' dogmatic views of their personal preferences make you feel wrong for crafting a different system. You have your own personal beliefs, values, needs, and finances, and your budget can reflect that.

Budgeting Basics

Budgeting & Saving

6 mins

MONEY TIP

How to Do Smart Debt in a High-Rate World

For most people, debt is a part of life, and that's not necessarily a bad thing. Used with care, borrowing can be an excellent way to set yourself up for the future, increase your quality of life, and even multiply your returns if invested.

But between inflation and rising rates, the cost of doing debt has risen precipitously in recent years, making it more difficult to take on debt efficiently.

Rates on mortgages, credit cards, personal, student, and auto loans have all risen noticeably and drastically increased the cost of borrowing.

So, is there anything we can do about it? Is there a way to do "smart" debt in this environment?

Beat credit cards at their own game by only spending on cards with 0% or low introductory APR offers. For most borrowers, opening a new credit card is not going to hurt their credit profile, and it may even help by decreasing utilization rates. If you have to take on CC debt, do it interest-free by taking advantage of an intro offer.
Don't get married to a mortgage right now amidst these elevated interest rates. Sure, refinancing does cost money, but if rates drop low enough, the cost savings over the life of your mortgage will far outweigh it.
If you're in the market for a new vehicle, do a few things: Wait if possible, don't buy new if possible (go a few years older), and put down as much cash as possible. Rates on auto loans have increased alongside all others, and the amount you'll spend on interest over the life of your loan has spiked. If you can wait until you're able to buy a car outright or put down a sizeable down payment, the savings will thank you.

🌊 BY THE WAY

💰 Answer: Per the latest poll on that feeling, it's 77%. (CNBC)
📦 Uber is now working for UPS (Axios)
👀 ICYMI. Housing affordability hits a new low (Finny)
👦🏻 Younger employees are feeling stressed out (Fortune)
📚 Lesson of the day. Watching so many homeowners become "equity rich" in such a short period of time likely has many wondering — is it better to rent or buy?

Buy vs Rent?

Housing

6 mins

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